ISLAMABAD: Prime Minister’s Office (PMO) has asked Power Division to convene a meeting of Steering Committee on payments to IPPs at the earliest to resolve their issues on priority basis, official sources told Business Recorder.
On March 13, 2023, Chinese Charges d’Affaires Ms/ Pang Chunxue called on Syed Tariq Fatemi, Special Assistant to Prime Minister on Coordination and raised concerns regarding power projects established under China Pakistan Economic Corridor (CPEC) initiative.
According to Chinese Charges d’Affaires, overdue payments to Chinese IPPs, currently stand at $1.5 billion, are causing huge concerns to Chinese businesses.
CPEC power projects: China concerned over payment issues
SAPM was informed that Chinese power plants at Hubco, Sahiwal, and Port Qasim are facing currency exchange restrictions, causing difficulty in importing coal. These power plants require a specific grade coal for power production. If the same coal is purchased on spot from local market, then Nepra mandates that the price should not be higher than the price of the imported coal, which is not feasible due to exchange rate fluctuation/ rupee devaluation.
Capacity payment deduction still exists despite assurances given in the past as a result of which these power plants are being penalized for not operating at full capacity. She clarified that these power plants are not operating at capacity due to difficulty in purchasing the requisite amount of coal for power production.
SAPM noted that there are still gaps between the Revolving Fund raised by Pakistani side and the Revolving Account Agreement signed between the two countries.
Due to Pakistan’s import restrictions, many Chinese companies are facing difficulties in customs clearance at Karachi Port.
Pang suggested that their concerns could have been discussed in meetings of Joint Committee, a forum specifically established by the Prime Minister to resolve issues of the Chinese IPPs but most regretfully, this Committee, which was to meet every two weeks, has not had any meeting since its inaugural meeting in December last year.
SAPM recommended that a meeting of the Committee be called soon wherein representatives of the Chinese embassy, as well as, the relevant companies should be invited and their concerns addressed meaningfully so that Pakistan is not viewed as less than serious in resolving Chinese concerns.
In a letter to Executive Director, Exchange Policy Department, State Bank of Pakistan (SBP), Managing Director, PPIB, Shah Jahan Mirza stated that Chinese companies are facing severe delays in executing their foreign payment obligations towards fuel suppliers and O&M contractors due to unavailability of foreign exchange; and that their Authorized Dealer, named as Standard Chartered Bank (SCB), vide its letter of February 2, 2023 has specifically mentioned that they are not in a position to arrange foreign exchange for pending payments of the Company amounting to $ 40.44 million for imports/ commercial remittances.
On March 7, 2023, the Prime Minister’s Office (PMO) directed the Power Division to hold a meeting with Special Assistant to Prime Minister on Power, Zafaruddin and sort out issues relating to establishment of Revolving Account meant to facilitate payments to Chinese power plants established or being established under the CPEC initiative.
Copyright Business Recorder, 2023